9/26/2006 @ 10:40AM

Choosing The Right Financial Adviser

Working with a financial planner is not a bad idea to help you set financial goals and take the steps necessary to accomplish them. As is the case with most things in life, you’re more apt to commit to a plan of action and stick to it if you have someone looking over your shoulder or holding your hand through the process. Choosing the right adviser for your needs is the important first step.

There is no shortage of individuals and firms willing to help you manage your money. From the big brokerages and “wealth mangers” like
Merrill Lynch
, UBS,
Wachovia
and Smith Barney to the local independent planner who might coach your kid’s soccer team, all of them could be viable and competent candidates for managing your money.

But before you bring in your checkbook or a briefcase full of cash into their offices, you’ve got to take an inventory of your personal financial situation. Figure out what it is that you want to accomplish. Maybe you hope to send your kids to college or accumulate assets for retirement (if you don’t like the taste of cat food). Maybe you’ve just inherited money from your parents or are helping to pay for their long-term medical care.

Understand that the term “financial adviser” can encompass a wide range of talents, or lack thereof. Many firms and practitioners fancy themselves as a single source for all things financial about your life: investments, lending, insurance, estate planning and more. The best advisers will know enough about each of these to be helpful, the worst ones enough to be dangerous.

Advisers also have different ways of putting bread on the table. Some financial “planners” will consult with you for an hourly fee to create a financial plan and maybe even get you rolling with a targeted investment-asset allocation (a mix of stocks, bonds, cash and other investments) or a model portfolio. Others are more of the traditional “stock jockey” variety who are paid by commissions on trading activity, and possibly through what can be inelegantly but accurately described as kickbacks for selling particular products (fee-laden funds and annuities, for example). An increasing number of advisers are paid as a percentage of assets under management, usually up to 1.5% to 2%.

Which type of adviser you choose depends on how likely you are to do a lot of trading. If you plan to do a lot, you’re probably better off going for the percentage of assets under management approach. If you plan to buy and hold, commissions will be the better deal.

A good way to get going on your search is to seek out family and some close friends who already have relationships with an adviser. Solicit their opinions, and put together a short list of potential candidates. Maybe even give that soccer coach guy a try. Set up some office appointments to meet with these candidates who might become your financial consigliere.

The Certified Financial Planner Board of Standards has an interest in maintaining the ethical standards of their members, and suggests these ten questions you should ask any adviser you are considering hiring

After you’ve run through the names on your short list and done your interviews, you’ll probably feel comfortable and have a decent chemistry with at least one of the advisers. Set up a time to meet again when you can begin to identify and establish goals and objectives and get moving on your plans.